Here is a fun earnings scorecard: revenue up more than 16x, a narrower-than-expected loss, a record backlog, and a raised full-year forecast. And the stock still fell. That is the story of Ondas Inc. (ONDS) on Thursday.
The defense technology company reported third-quarter revenue of $167.5 million. A year ago, that number was $10.1 million. Revenue also nearly doubled sequentially and beat analysts' estimate of $148.04 million. Pro forma organic revenue grew 64% year over year.
The bottom line looked better than feared too. Ondas posted a loss of 10 cents per share, narrower than the 14 cents analysts expected.
So Why Did The Stock Fall?
Margins. Adjusted gross margin fell to 34.8% from 50.4% in the previous quarter, with an unfavorable product mix and production inefficiencies doing the damage. Management expects fourth-quarter gross margins to stay near third-quarter levels, which is not exactly the trajectory investors want to hear about.
The adjusted EBITDA loss also widened to $59.7 million as Ondas ramped up spending to support future growth. Growth costs money, and right now Ondas is spending plenty of it.
Defense Demand Is Real
The order book tells a more encouraging story. Ondas secured about $214 million in third-quarter orders, supported by demand for Sentinel, ULTRA, IonStrike and counter-drone systems. Backlog climbed 36% sequentially to $835 million as of Sept. 30.
Chairman and CEO Eric Brock highlighted expanding U.S. defense programs, sovereign AI capabilities and strategic acquisitions. The company also launched Regna AI, which uses NVIDIA Corporation's (NVDA) Nemotron models and Palantir Technologies Inc.'s (PLTR) integration platforms.
The balance sheet looks sturdy. Ondas ended September with $820.3 million in cash and short-term investments, including restricted cash. Total debt stood at just $6.1 million.
The Forecast Goes Up
Ondas raised its 2026 revenue forecast to at least $550 million, up from its previous range of $525 million to $550 million. The revised outlook exceeds analysts' estimate of $536.47 million.
Management expects fourth-quarter revenue to exceed $250 million, with pro forma organic growth of at least 75%. For 2027, Ondas forecasts revenue of at least $1.1 billion, excluding future acquisitions.
On profitability, the company expects its operating platforms to achieve adjusted EBITDA profitability in the fourth quarter. It also moved up its company-wide adjusted EBITDA profitability goal to the third quarter of 2027.
ONDS Price Action: Ondas shares were down 6.46% at $5.36 at the time of publication on Thursday, according to market data.
